First Notes and Impressions from Today's Teleconference

By Pamela Jones
Groklaw

November 18 2003

2. They intend to go forward now on a second front, against end users. First they will target a victim from among the 1,500 who got letters, within the next 90 days. They want a victim who represents the problem, as they see it, to make an example of. But that is only the starting point, not the ending point. It could be an HP end user. They intend to enforce copyrights in System V and in code they say is being violated stemming from the old BSDi settlement. My impression was that the SCOForum was such a bust, they had to come up with some new code somewhere and so the old BSDi stuff is being trotted out. They will show that code to end users down the road.

3. They seem to have about given up on the voluntary licensing program, although they say they are going forward on that one by one, tailoring invoices to companies after they look into what they are using. After that, if the company doesn't buy a license, it gets turned over to David Boies for litigation.

4. As for just ripping out the code and rewriting it, they say the Linux community can do that, but it'd be hard, in their view. Example, the snip of copyrighted code they showed and then it was taken out -- that solves that for the 2.6 kernel, Darl said, but not for the 2.4, which is being used by companies now and is still out there. So they will go after 2.4. (Is this stupid or what?) If they win the IBM case, then it's a "million lines of code" that would be hard to replace, but the community could choose to go back to the 90s and rip out SMP, RCU, etc. and slowly rewrite equivalencies.

5. Microsoft isn't funding the litigation, they sort of said, but they are "on the same side of the table with SCO", according to Darl, along with Wind River Systems, Sun Microsystems, and all other proprietary companies. The world according to Darl. Details to follow.

6. The $1 Million and the 400,000 shares were paid to Boies for prior contingency events, specifically, according to Bench, the $50 million equity funding and other events. In the future, there could be other such contingencies, such as licenses, the company being bought, successful litigation and then Boies gets more moola. Darl described it as a partnership between SCO and Boies, so he's up to his eyeballs. No excuses. His firm now owns about 2-3% of SCO. As SCO succeeds, so does Boies, said Darl. And, happily, I might add, vice versa.

Lordy, me. Another speech by Darl to go today. How much can a girl take in one day? Then, right after the speech there will be a town hall meeting, which will be tonight's episode of The Linux Show. The show will start at 5:45 Pacific Time. That's 15 minutes earlier then it's usual start time. Checkout the announcement here [ http://www.thelinuxshow.com ]. The announcement is about halfway down on the page.

First, here is what they said about Microsoft:

Someone said to them that there have been suggestions in the Linux community that this litigation is being funded by Microsoft, that they have been coordinating with Microsoft and they commented like this:

DAVID BOIES: "I have not had any conversation nor, so far as I know -- and I think I would know -- has anybody from my firm had any conversation with Microsoft or with Microsoft representatives. This has been entirely litigation that we have undertaken on behalf of SCO and obviously the recent equity transaction, [unclear] preferred transaction, as I think Darl indicated, will provide adequate financing for the litigation without looking to any other company."

DARL MCBRIDE: "SCO's perspective: We're 100% driving our strategy here. There is no connection with Microsoft on this. It is a favorite topic of the open source community. People love to talk about this, because there are natural interests here. Anybody that owns an operating system that thinks it shouldn't be for free would naturally fall on this side of the table that SCO is on. So it's not just Microsoft. It's Wind River Systems. It's Sun Microsystems -- essentially anybody who thinks their valuable intellectual property in an operating system should have a price tag on it naturally lines up with SCO on this."

So, what do you think? Do you take that as an unequivocable no from either one of them? Boies said he has not had "any conversations" with Microsoft. But how tricky is he in his speech? I don't know. But I know he's a lawyer. Did he have email interaction instead? Letters? Was the "conversation" with SCO instead, who just told Boies about it? Some other intermediary? I have no idea. If someone gave that answer on a witness stand, they'd probably be told they hadn't been asked if they had had any conversations with Microsoft. Rather, they were asked if MS was funding it or coordinating with SCO.

And Darl's answer seems even less firmly a no. He names three companies and says they are naturally on SCO's side. I take that as saying that if they haven't given them money, they are at least rooting them on.

That means, of course, that Groklaw has just widened its scope of inquiry accordingly to include not just SCO but all other parties sitting on that side of the table.

Here's [ http://www.techweb.com/wire/story/TWB20031118S0003 ] a pretty accurate account of some other points from the event, while you wait for a transcript.

With regard to SCO suing Novell and saying that they will enforce a non-compete clause, it is a bit hard to know for sure what they mean. There is no non-compete agreement in the record. They may be referring to clause 1.6 of the 1995 Asset Purchase Agreement, which you can read in its entirety here [ http://www.groklaw.net/article.php?story=2003111023050367 ]. However, as you will see, the interpretation they appear to be giving those words depends on Linux actually containing SCO's code, something that is yet to be proven and which many feel is unlikely ever to be proven. Alternatively, they may be thinking of Linux as being a derivative of Unix, which in my view it is not, but in the teleconference Darl said, "Linux is a knockoff of Unix." So perhaps that is his thinking.

If they mean the Unix code they claim is inside Linux, the next question (after they actually prove that claim, which they haven't yet) would be: how much do the four chunks SCO is claiming, SMP, RCU etc., constitute in the whole picture? To qualify for the clause to kick in, it would have to "constitute a primary portion of the value of the total bundled or integrated product", which arguably it would not, especially when you consider that not a lot of us actually use that code in the first place, let alone it being only a portion of the whole. Then there is another issue. This contract was between Novell and old SCO, not current SCO, so that is a further complication. To assert such broad claims when the picture includes such a lot of Ifs seems ...well, typical of SCO.

Here is the language I think they may be referring to:

"Seller agrees that it shall use the Licensed Technology only (i) for internal purposes without restriction or (ii) for resale in bundled or integrated products sold by Seller which are not directly competitive with the core products of Buyer and in which the Licensed Technology does not constitute a primary portion of the value of the total bundled or integrated product."

Obviously, this is talking about Unix code, the code they were licensing, not Linux. You have to stretch quite a bit to even get what McBride might be thinking to imagine this as being applicable to Linux, because SCO wasn't licensing Linux and the wording is talking about the code they were licensing.

Here [ http://www.novell.com/news/press/pressroom/news_brief/archive/2003/11/pr03042.html ] is Novell's reaction:

"Novell has seen the November 18 InfoWorld article in which SCO CEO Darl McBride refers to a supposed non-compete agreement between Novell and SCO. Mr. McBride's characterization of the agreements between Novell and SCO is inaccurate. There is no non-compete provision in those contracts, and the pending acquisition of SUSE LINUX does not violate any agreement between Novell and SCO.

"Novell has received no formal communication from SCO on this particular issue. Novell understands its rights under the contracts very well, and will respond in due course should SCO choose to formally pursue this issue."

UPDATE From an alert Yahoo Finance comment here [ http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1600684464&tid=cald&sid=1600684464&mid=63139 ]:

"The Novell agreement contains language that anticipates Novell competing directly against old SCO's core business:

'The right to nomination for election to Buyer's Board of Directors as set forth in this Section 6.1 shall terminate in the event that Seller's core products become directly competitive with buyer.'

" '6.2 Right to Maintain.(a) Until the earlier to occur of (i) Threshold Date;

" (ii) Seller's core products becoming competitive with Buyer's core products or (iii) the expiration of three years from the date of this Agreement...' "

"The part of the Agreement that everyone is focusing on just set the conditions on Novell's license-back of Unix from old SCO. They're not prevented from competing, just not allowed to sell [Unixware technologies] under certain conditons."

03:06 PM EST

Copyright 2003 http://www.groklaw.net/ - http://creativecommons.org/licenses/by-nc-nd/3.0/